Explained : FTA with India: ‘Bad deal’ or ‘strategically significant milestone’? and Its Impact

Business groups have welcomed the announcement of a new Free Trade Agreement with India, but a partner in the coalition government will not support it, saying it’s a “bad deal”.

The government announced this evening that it had reached conclusion of free trade negotiations with India

It said the deal will eliminate or reduce tariffs on 95 percent of exports, with wins for kiwifruit, apples, meat, wool, coal, forestry, and more.

But only limited gains were secured for dairy, with duty-free access for re-exports, bulk infant formula, and a 50 percent tariff cut for high-value milk albumins under a quota.

Export NZ, the NZ Forest Owners Association, the Meat Industry Association, Beef + Lamb NZ, Horticulture NZ, NZ Timber Industry Federation, Wools of NZ have all expressed support for the deal, but NZ First is withholding political support – which means it is now in the hands of the opposition whether it passes or not.

‘A bad deal for New Zealand’

In a statement released just as the deal was announced on Monday, NZ First leader Winston Peters said it was a bad deal for the country.

“It gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy.”

New Zealand First exercised the agree to disagree provision of its coalition arrangements when Cabinet approval for the deal was sought last week, and made it clear that it would vote against enabling legislation if and when it was introduced to Parliament.

“While New Zealand is completely opening its market to Indian products under this deal, India is not reducing the significant tariff barriers currently facing our major dairy products,” Peters said.

NZ First also expressed concerns about the proposed changes on migration. The trade deal creates a new employment visa for Indian citizens, and according to the party will likely generate greater interest in Indian migration to New Zealand during a tight labour market.

Peters said his party’s approach to trade deals has been consistent, longstanding and principled.

“New Zealand First’s long-standing approach has been to support those FTAs that deliver a good deal for New Zealanders and to oppose those that do not.”

Prime Minister Christopher Luxon said he was confident the government would be able to pass the legislation, despite requiring Labour’s support to do so.

“We’ve seen a lot of good bipartisan support for trade across the Parliament, and we’ll continue to build the case for that.”

He said he had “tried to deal” with NZ First’s objections, and “reassured them” about the parts that were in the interests of New Zealand.

“At the end of the day, this is going to be the third biggest economy in. In the world. This is an economy that New Zealand needs to be in.”

‘An important step for future resilience and profitability’

Despite NZ First’s concerns, many in the business community are heavily in favour of the deal.

ExportNZ executive director Joshua Tan said many exporters had been looking at India as a potential market for years.

“The problem is that prohibitive tariff barriers, often 30 percent to 60 percent, and up to 150 percent for wine, have limited what businesses can realistically do in India. This new agreement begins to bring those barriers down, gives exporters more certainty and more options.

“The FTA will also streamline certain customs procedures at the border, reduce costs, and guarantee that all goods will be released by India’s customs within 48 hours.”

New Zealand Forest Owners Association chief executive Dr Elizabeth Heeg said forestry was already New Zealand’s largest export to India, worth NZ$126 million.

Heeg said the new FTA provided the platform to lift volumes over time and grow higher-value trade in processed wood and building products.

“India has scale, strong demand for New Zealand wood products, and significant momentum, with its economy forecast to grow to NZ$12 trillion by 2030.”

The deal was a “strategically significant milestone” for New Zealand’s red meat sector, according to Meat Industry Association chair Nathan Guy.

“An FTA with India will unlock a promising market that has been constrained due to the 30 per cent tariff currently on New Zealand sheepmeat.”

Beef + Lamb New Zealand chair Kate Acland said the announcement was also positive for sheep farmers, and “puts us on a level playing field with Australia”.

“Although the impact on farm-gate returns may not be significant in the short-term, this is an important step for future resilience and profitability in the sector.

Horticulture New Zealand (HortNZ) chief executive Kate Scott said improved access to India will further diversify horticulture’s export portfolio.

“With India forecast to become the world’s third-largest economy, this FTA offers our growers and exporters an opportunity to build scale and value over time.

“While the full commercial impact will take time to be realised, especially for products with phased access, it sets the industry up for growth in the future.

The NZ Timber Industry Federation also welcomed the news of the agreement, saying it created “huge opportunities” for sawmillers and wood processors in New Zealand.

“The potential market in India is huge and while there are difficulties such as transport and logistics the industry is excited by the opportunities the FTA will provide to New Zealand.”

India was home to some of the world’s leading premium handmade carpet and rug manufacturers, Wools of New Zealand pointed out.

Chief executive John McWhirter said Wools of New Zealand was already working closely with these producers to sell finished wool products into the New Zealand market.

“At the same time, we are partnering with Indian manufacturers supplying finished wool products to major European brand retailers.

“A Free Trade Agreement with India will strengthen these relationships and improve the commercial settings for doing business. Lower barriers and greater certainty will help make wool products more cost-effective and competitive, particularly as we work to displace plastic-based alternatives.”

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